You’ve heard that your credit score can affect your ability to get a loan or credit card — but did you know it can also impact your car insurance rate? In most states, your credit score plays a surprisingly big role in how much you pay for auto coverage.
In this guide, we’ll explain why insurers use credit scores, how much it can raise or lower your premium, and what steps you can take to improve your rate — even if your score isn’t perfect.
Do Car Insurance Companies Check Your Credit?
Yes — in most U.S. states, insurers are allowed to use something called a “credit-based insurance score” to help determine your premium. This score is similar to your regular credit score but weighted differently. It helps insurance companies predict how likely you are to file a claim.
Only a few states — including California, Hawaii, and Massachusetts — prohibit the use of credit scores in car insurance pricing.
How Much Does Your Credit Score Affect Car Insurance?
The difference can be dramatic. According to industry data, drivers with poor credit can pay up to 60% more for the same policy than those with excellent credit.
Example: Average Annual Premium by Credit Tier
- Excellent credit (750+): $1,200/year
- Good credit (700–749): $1,400/year
- Fair credit (650–699): $1,700/year
- Poor credit (below 650): $2,000+ per year
That’s a difference of more than $800 annually — just based on credit.
Why Do Insurers Use Credit Scores?
Insurers argue that credit-based insurance scores are a reliable predictor of risk. Statistically, people with lower credit scores are more likely to file claims, miss payments, or engage in risky financial behavior. Even if it’s controversial, the data backs it up — and so companies continue to use it.
How to Lower Your Car Insurance If You Have Bad Credit
1. Shop Around
Every insurance company weighs credit differently. Some penalize low scores more than others. Compare at least 3–5 quotes.
2. Bundle Policies
Combining auto with renters or home insurance can lead to discounts, even if your credit isn’t great.
3. Use a Usage-Based Program
Let your driving speak for itself. Many insurers offer telematics programs that reward safe drivers with lower rates — regardless of credit.
4. Raise Your Deductible
Opting for a higher deductible lowers your monthly premium. Just be sure you can afford it in case of an accident.
5. Improve Your Credit Score
Small changes can make a big difference. Pay bills on time, reduce credit card balances, and check your credit report for errors.
States That Don’t Allow Credit-Based Insurance Rates
- California
- Hawaii
- Massachusetts
- (More states may follow suit — always check your state laws)
Final Thoughts
Your credit score doesn’t just affect your mortgage or loan — it could be quietly costing you hundreds per year in car insurance premiums. While you can’t change your zip code or age, you can change your credit habits and your insurer.
Take action now: compare rates, enroll in telematics, and work on improving your score. Even small gains can mean big savings.